The TIAA-CREF S&P 500 Index Fund Prospectus defines
Active Management Risk as “The risk that Advisors’ strategy, investment
selection or trading execution may cause the Fund to underperform relative to
the benchmark index or mutual funds with similar investment objectives.”
Trading execution can run up brokerage fees and taxes which
can eat into your returns. Owning shares in a mutual fund means you have a
partial interest in a professionally designed portfolio. Within a mutual fund
if an advisor trades a stock on your behalf it can incur fees and taxes in the
portfolio serving as a drag on return. Picking stocks that you can hold for a
long time can enhance your chances of better long-term gains. The same can be
said about an advisor managing your mutual funds.
No comments:
Post a Comment